Carbon tax policies on both sides ignore the truth: it’s not going to help

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Paul Frijters does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond the academic appointment above.

You can see the A to Z of the roughly 40 initiatives the government is promising here, but let me cut to the chase and summarise it by saying there will lots of new bureaucrats charged with the impossible task of measuring many forms of emissions (good luck to the hapless ones who get agriculture or forestry!), some subsidies for people doing research on climate change, and some extra cash for those who in various ways adopt new technologies that involve fewer emissions (let’s call it the clean cow initiative).

The Coalition’s plan can most easily be described as planting a few trees and burying some coal.

The bigger picture on this is that both parties are using a pea shooter to take down an elephant.

Australia’s per capita carbon emissions are amongst the highest in the world, our economic growth is going hand in hand with more energy use (1.9% per year between 1997-98 and 2007-08), economic analyses on energy pricing show that the small carbon tax is very unlikely to be enough to make anything but coal-powered electricity generation the cheapest option, and even the promised 5% reduction in carbon emissions by 2020 (which most certainly won’t be reached unless someone cheats on the numbers) will make no noticeable difference to anything.

Hence while the government shoots a small pea and the Coalition argues even that pea is too large, there is no doubt that neither policy is going to do anything substantial about global warming.

It’s worse: most of the big sources of emissions that Australia could influence are not even discussed. If Australia wanted to make a serious dent in world carbon emissions it could seriously hinder the export of coal.

The stuff is dug up here and if we wanted to stop digging it up, we could do so tomorrow, but of course that would really cost us something so no-one dares even breathe that possibility and prefers to pretend its not our problem. Similarly, another large source of emissions is the yearly back-burning we engage in to prevent large fires from wreaking havoc with our more leafy suburbs.

After the fires in Canberra and Melbourne, back-burning is common practice once more, but the amount of emissions that goes with that dwarf the anticipated reductions from carbon pricing.

Not to mention of course that many forms of emissions (such as from meat production) are so hard to measure that it is clear we are not even going to bother.

It gets worse again: on the world stage, international agreement on carbon pricing is dead in the water.

Copenhagen was its Waterloo and it seems highly unlikely that its going to be second-time lucky (and at the time of Copenhagen I publicly predicted the circus that occurred, i.e. world politicians forced to pretend they were going to do something but not actually doing anything).

So what climate outcome do the Australian political parties actually hope to achieve by inflicting an admittedly minor cost on itself?

The idea that the likes of China and India, who emit far less than we do per person, are going to see the error of their ways and seriously constrain their growing economies after watching us make this token sacrifice is simply ludicrous.

You can just imagine the debates in the New Delhi parliament where some audacious politician suggests they should carbon tax their poor population so as not to be out-done by the few cents thrown at the issue by the millionaires in Australia!

It is sheer cloud-cookoo land stuff to argue that Australia is “doing its bit” and this will be seen as a shining light by the rest of the world.

I predict that world leaders will say “well done” in public and in private will laugh out loud at those silly Australians and their desire to pretend they actually care.

You may think I am just being the cynical economist here, but I find myself in the good company of many academics within the green movement on this issue. Greens Senator Christine Milne for instance called the government’s target ‘pathetically weak’.

Of course their solution, which is that Australia should go back to the per capita energy usage it had in the 1900s is also purely symbolic because even a complete reversion to the middle ages won’t make much impression on the governments of the poor nations in this world (is the slum dweller in Chennai really going to give up his dreams of living in a house with air conditioning and a shiny car just because Australians have abandoned them?).

To see just how strange the basic reasoning is of those who believe that this token effort is going to do anything to change the trajectory the world is on, imagine the Americans reacting to the bombing of Pearl Harbour in 1941 by doubling the number of guns protecting just New York while arguing that this token increase in American military would stimulate the other countries with a stake in thwarting the Japanese advance to mobilise their whole economies in order to fight the Japanese. You’d be laughed out of town.

Yet that is exactly what you are being asked to believe that the rest of the world is going to end up doing in response to the policies of both the government and the Coalition.

Hence one should see the policies currently on the table for what they are: competing rain dances.

They are policies that lack a goal and that appeal to some mythical ‘example function’ for their effect.

It is, to borrow a phrase from my colleague John Quiggin, a great example of voodoo economics. How ironic that John is amongst the rain dancers himself.

Is there then nothing one can do? Should we resign ourselves to the inevitability of climate change and hope that the climate system will correct itself after we’ve run out of all the coal, gas, oil, brown coal, and other easy-to-dig-up fossil fuels of this world?

My honest answer to this the last 15 years has always been ‘yes’, but there is some desperate hope and some desperate action for those who feel they must.

The desperate hope is that we will get a technological breakthrough that would make one of the renewable energy sources cheaper than most fossil fuels.

Despite quite substantial investments in the last 50 years that hope has proven forlorn so far, but we should of course all hope for that outcome because it would mean we can keep the economic growth party going free of guilt (although we would then of course find something else to be worried about).

The desperate action would be to sit around the table with just a coalition of the willing and ask our best engineers if they have come up with anything to actively steer our climate to a desired target.

You don’t hear about this so often in Australia, but there are a lot of ideas being worked on elsewhere (particularly the UK), with probably the front runner some form of artificial smog that we can pump high in the atmosphere in order to reflect more sunlight in order to cool the earth.

The great advantage of such geo-engineering is that you don’t need a mythical world coalition to do it.